As the AP shows, there are a lot of moving parts to this one.
Foreclosures began to ease last year as banks came under pressure from the Obama administration to modify home loans for troubled borrowers. In addition, some states enacted foreclosure moratoriums in hopes of giving homeowners behind in payments time to catch up. And in many cases, banks have had trouble coping with how to handle the glut of problem loans.
These factors have helped slow the pace of foreclosures, but now that trend appears to be reversing.
Thanks for the context.
The New York Times also looked at the mortgage story, and saw a glass that is half empty, at best.
Check out this gloomy lede:
The number of homeowners who defaulted on their mortgages even after securing cheaper terms through the government’s modification program nearly doubled in March, continuing a trend that could undermine the entire program.
Those details come from data released by the Treasury Department and the Department of Housing and Urban Development. And the numbers are small: “2,879 modified loans had been ended since the program’s inception in the fall, up from 1,499 in February and 1,005 in January,” the Times said.
The Treasury Department said it could not explain the growing number of what it called cancellations, almost all of which were apparently prompted by the borrower’s being unable to make the new payment. A scant number — 37 — were because the loan had been paid off, presumably because the borrower sold the house.
The Times spoke with Shaun Donovan, the HUD secretary, who downplayed the defaults—“One percent of these loans defaulting is a tiny fraction”—and pointed instead to a quickening pace of modifications: “The number of active permanent modifications in March was 227,922, an increase of 35 percent from those in February. An additional 108,212 permanent modifications are awaiting borrower approval.”
But Times readers were also pointed to a report from the Congressional Oversight Panel, which complained that, despite the modification program’s goal of helping as many as 4 million households, “only some of these offers will result in temporary modifications, and only some of those modifications will convert to final, five-year status.”
There’s more worry from Julia R. Gordon at the Center for Responsible Lending, who expects “the number of post-modification defaults to continue to rise.”
“It’s definitely alarming to look at those statistics,” she said. “The current model for modifications doesn’t necessarily produce sustainable results.”
Calculated Risk provides some more good context to the situation, including data that show those with permanent mods had a median “back-end debt-to-income ratio” of 77.5% before their modifications. That’s the ratio of their total monthly debt payments (mortgage principal and interest, taxes, insurance, plus car payments, alimony, and other stuff) to monthly gross income, and it goes down to 61.3% after the mods. “Just imagine the characteristics of the borrowers who can’t be converted!”
The site also highlights HAMP data that show the pace of new trial modifications slowing sharply, from more than 150,000 in September to around 57,000 last month. “This is slowest pace since May 2009 and is probably because of two factors: 1) servicers are now pre-qualifying borrowers, and 2) servicers are running out of eligible borrowers.”
That doesn’t sound good. As Calculated Risk puts it,
In summary: 1) the program is slowing, 2) the borrowers DTI characteristics are poor - and getting worse, and 3) the re-default rate is rising. Oh, and 4) there are a large number of borrowers in modification limbo.
Not good either. And not good for readers of USA Today just to focus on that sliver of delinquency news.

The Times mentioned this in its Friday edition in the national news not business and more should have taken USA Today up on that. Some of the rise was most likely some of the new buyers since that $8000 was to go off this month, yet I think I remember it being mentioned in PBS this past week that it's been extended--but I have no idea for how long. It was longer than the job benefits when end on May 30. Most of those that were dropped will hardly get theirs by then and it's over. I hope the Democrats constantly remind the voters this week how the Republicans cut food and rent money out of their living accounts. How many will be losing their rentals or their mortgages because the income was held up??? The mortgages are becoming weaker and more numerous for foreclosure simply because the banks refuse to alter the principle. They can't do as some states did during the Depression and require the percentage only. The percent is too low and Geithner won't raise it yet. My grandfather a carpenter with 3 boys kept his home since all he had to pay was the per cent due until the war was over . Since he has 30+ years in carpentry for homes he was the first called when a new job came in. The investors today refuse to cut back on their part of whatever homes they have so both are holding people hostage for a few dollars. I hope the banks get stuck with homes they can't sell and must pay taxes on since they own the papers for the property--or the investors. We do have to watch what certain papers and commentators say since they are not as truthful as they should be and don't show how strong or weak their basis is. Not just USA Today. Fox and CNN can be horribly silly in some of the remarks they make on these subjects.
#1 Posted by Patricia Wilson, CJR on Fri 16 Apr 2010 at 05:27 PM